- Warren and Nadler have reintroduced legislation to reform bankruptcy for student-loan borrowers.
- With approval from a judge, it would streamline the process for borrowers who wish to get rid of their debt.
- For a borrower to be able to discharge their debt, they must meet very strict standards.
Two Democratic lawmakers are determined to make President Joe Biden’s life easier Student-loan forgivenessNot the only way to get relief for borrowers.
Last week, Massachusetts Sen. Elizabeth Warren was joined by House Judiciary Chair Jerrold Ndler reintroducedThe Consumer Bankruptcy Reform Act (the Consumer Bankruptcy Reform Act) would simplify the bankruptcy process and offer relief to Americans who are in serious debt.
Particularly for student-loan borrowers, bankruptcy is a great way to get rid of debt. Very difficultThe strict standard of undue burden requires that borrowers prove they are unable to maintain a minimum standard living standard, that their circumstances are unlikely to improve and that they have made good faith efforts to repay their debt.
Warren and Nadler’s legislation will make it easier to borrower who have no other means of paying off their loans.
“The Consumer Bankruptcy Reform ActWarren stated in a statement that it was time to take long-overdue steps to make it easier and less costly for people in financial trouble to obtain meaningful bankruptcy relief. “I’m thankful to be working alongside Chairman Nadler on this crucial legislation to give struggling family a better shot at getting back on track.
According to the bill, it would create a new Chapter 10 bankruptcy law. CBS News, which would allow student loans to be treated like credit cards and other forms of consumer debt — meaning student-loan borrowers could file for Chapter 10 and get their student loans discharged through a simpler process once a judge approves it.
The bill will include provisions that help student-loan borrowers. It would also close loopholes within the bankruptcy code, which aid wealthy people. It would address racial disparities by exempting income relating to child support, child tax credit and earned income tax credit from being factored into a borrower’s financial ability to pay off debt.
Warren and some Democratic colleagues previously spoke out in favor of reforming the bankruptcy system to student-loan borrowers. In September, she A letter was writtenAttorney General Merrick Galrland addressed the issue of undue hardship. This standard “has proved so difficult to reach that most borrowers never attempt to discharge student loans through bankruptcy.”
She stated that the government’s efforts to reform student loans and provide bankruptcy relief for those in extreme financial straits required that the guidance be issued immediately.
Biden’s Administration has pledged to reform student-loan bankruptcy, but very little progress has been made. Federal Student Aid head Richard Cordray SubmittedA House education subcommittee stated last fall that the “process doesn’t work well.” It needs to be reformed … and we’re committed to doing that.” The administration continued to function throughout the pandemic. OpposeDebtors’ requests for debt relief in court have prompted Democratic lawmakers and others to intensify their efforts to reform the process.
As Insider Previously reportedBiden played an important role in making the bankruptcy standards stricter. He supported the Bankruptcy Abuse Prevention and Consumer Protection Act (a bill he sponsored as a senator in 2005). This increased the undue hardship requirement for borrowers using private student loans. This allowed borrowers to be more specific about their financial situations and would not have to present it to the court.
Warren and Nadler have also been supported by 86 law professorsLast week, a letter was sent by a person who stated that the existing consumer bankruptcy system was too costly and too complicated to fulfill this function. People who are in need of filing can often be denied access because they cannot afford an attorney.
They stated that “The Consumer Bankruptcy Reform Act turns the clock back and makes student loan subject to bankruptcy discharge.” “Debtors who can pay will not be able to walk away from their obligations—student loans or otherwise. For those who are unable to pay, student debt relief will allow them to be released from the student loan burden. It will also help the economy by allowing income for productive investments, such as buying homes or starting families.
